Housing Minister Phil Twyford said: "It's about good design...and critically it's about the services to help vulnerable people to get their lives back on track."

The Salvation Army says it's not enough and a bare minimum of 2000 houses should be built for homeless people each year.

Policy advisor Alan Johnson told Newshub: "The Government promised in its May Budget to provide 6400 houses over four years, so clear we're not even meeting the minimum. So we think things are going to get worse until we do step up further."

The Greys Ave project includes 200 state houses. Eighty of those will house people with more complex needs, and 80 will be for private sale.

"It avoids the potential pitfalls of having a very high concentration of high needs people living in a close vicinity," Mr Twyford said.

But he admitted there's still a lot to be done to house the homeless.

"It's still not enough and we need to do more, and it's still going to take a while to solve this problem."

According the Salvation Army more is an understatement..

Mr Johnson said given the current need, he's perplexed why 80 of the homes will be sold to the private market.

Construction on the building is expected to begin mid 2019, with tenants in by 2021.

The Salvation Army does admit it's a good start for the Government, but says it needs to lift its targets to see any meaningful change.